Trade news
Exxon Mobil’s project in Mozambique
On 14th May 2019, the project of Exxon Mobil to develop business of LNG in Mozambique was approved by the country’s government. Exxon Mobil, the U.S. oil giant, took charge of the East African LNG project’s onshore operations following a $2.8 billion deal with Italy’s Eni in 2017. This project called “The Rovuma LNG project” is expected to produce, liquefy and market natural gas from three reservoirs located in the Area 4 block offshore Mozambique.
Qatargas and its vessel in the Panama Canal
Qatargas, the world’s largest LNG producer, announced on the 13th of May 2019 that Al Safliya, a Q-Flex vessel with a cargo carrying capacity of 210,000 cbm of LNG, completed the 82-kilometer transit on May 12th through the Panama Canal. This is the first Q-Flex type carrier and the largest LNG vessel (315 meter long and 50 meter wide) to transit the Panama Canal. As a reminder, the Panama Canal was expanded in 2016 through the completion of new Neopanamax locks, thereby allowing LNG vessels to pass through the canal.
In April 2018, the Panama Canal Authority announced it would accommodate vessels up to 51.25 meters wide opening the prospect for Qatargas’ Q-Flex vessels to transit. The transit of Al Safliya through the Panama Canal creates future opportunities for the 31 Qatari Q-Flex vessels, allowing them to discharge cargoes in the Pacific Basin and then proceed to the Atlantic basin to load their next cargo.
Chevron and Anadarko Petroleum merger
On the 9th pf May, 2019, Chevron which operates in Australia for LNG, has decided to has decided to back out of the Anadarko Petroleum takeover deal. Chevron will not make a counterproposal concerning the merger agreement with Anadarko and will allow the four-day match period to expire, so Chevron thinks that Anadarko will terminate the merger agreement.
Michael Wirth, Chevron’s chairman and CEO, stated that “Winning in any environment doesn’t mean winning at any cost. Cost and capital discipline always matter, and we will not dilute our returns or erode value for our shareholders for the sake of doing a deal”. If the merger agreement is cancelled, Anadarko will be required to pay Chevron a termination fee of $1 billion.
China raises tariffs on US LNG imports
On Monday this week, China announced that they will arise tariffs on US LNG imports from 10% to 25%. This decision will be effective on the first of June.
With this announcement, Big LNG companies like Cheniere Energy and Tellurian have no significant fear about this tariffs’ raising, as there will be no major impact on their ability to sell LNG around the globe outside China. However, this will benefit United States’ foreign competitors as Russia whose goal is to expand their offer to Europe and China.
Surely, this 25% tariff means that there will be no longer China consumers for US LNG. The biggest impact would be on projects for which contracts have not been signed yet. Indeed, companies seeking to finance LNG plants have to first obtain long-term commitments from customers. Consequently, it will be more difficult to negotiate long-term contracts.
Underlying the importance of the LNG market in the United Stated, President Donald Trump visited earlier this week the newly constructed LNG terminal in Louisiana, named Cameron.
This visit marked the start of the LNG production as an achievement and a great offer for several thousands of employees. Cameron LNG whose mother entity is Sempra Energy, is one of five LNG projects Sempra Energy is developing in North America; In addition, Cameron LNG shareholders are currently discussing a possible extension of the initial project, already authorized by the Federal Energy Regulatory Commission.
Henry Hub vs TTF vs JKM
Regarding the TTF market prices (the Dutch Title Transfer Facility) :
The Dutch Market has shown higher LNG imports over the last few months essentially from Russia, Norway and other places via liquefied natural gas tankers. Reacting from the decrease of Asian demand, the TTF market has implemented different projects. Moreover, a big majority of new LNG deals within Europeans markets is increasingly referencing to the Dutch market and also used in Asian trades. The weight of this market is getting higher due to the euro prominence gaining in energy trading. Finally, with uncertainties about Brexit the UK activity trading is turning on the Dutch Title Transfer Facility, as the market is surging.
For the Henry Hub American market prices
For the first time, at the same day, the Lower 48 States of USA has received gas deliveries in 6 LNG exports facilities including the 4 new ones in Louisiana named Cameroun and the two others in Georgia (the Kinder Morgan’s Elba) and in Texas Freeport LNG which they are preparing to begin production. The main observable consequence is the oversupply of LNG over the USA territory depending of those facilities. On the other hand, a dozen other second-wave projects that are actively being developed for service in the early- to mid-2020s will raise the supply.
Regarding the JKM Japan Korea Market prices
Asian spot prices for liquefied natural gas (LNG) are following European gas prices up, this week for the first time since last December. Additionally, as the trade war is currently open between China and the USA, tariffs on liquefied natural gas (LNG) imports from the United States would raise.
TTF forward curve
We can see a contango situation in the beginning and followed by a slight backwardation.
Sources:
https://www.reuters.com/article/us-usa-trade-china-lng/us-liquefied-natural-gas-shipments-to-china-face-mounting-tariffs-idUSKCN1SJ1O4 https://fingfx.thomsonreuters.com/gfx/mkt/12/241/241/US%20LNG%20shipments%20to%20China%20fall%20through%20trade%20war.png
